KUALA LUMPUR (Nov 20): TA Securities downgraded its call on Star Media Group Bhd (KL:STAR) to “sell” from “hold”, after the media group’s latest third quarterly results missed expectations.
“We view a stronger-than-anticipated recovery in adex (advertising expenditure), and positive momentum in the group’s property development initiatives, as key catalysts for a potential rerating of the stock,” said the research firm in a note Wednesday.
Notably, Star Media’s 9MFY2024 core net profit of RM9.8 million came in below TA Securities’ and consensus full-year estimates at 61% and 60%, respectively.
The house said this was mainly due to lower-than-expected performance from the property development & investment segment, with lower-than-expected progress billings from the Star Business Hub project.
TA Securities also revised its FY2024/FY2025/FY2026 earnings estimates for Star Media downwards by 11.0%/14.9%/16.2% respectively, to account for the lower-than-expected earnings from the Star Business Hub project.
Corresponding to its earnings downgrade, its target price for Star Media has been revised downwards to 41 sen (previously 44 sen), based on a price-to-book value (PBV) of 0.4 times 2025’s book value.
“In the near term, we expect Star (Media)’s core print and radio broadcasting segments to continue facing challenges due to persistent macroeconomic headwinds, such as inflationary pressures, which have led advertisers to be more conservative with their marketing budgets,” the house said.
Nonetheless, TA Securities anticipates a stronger performance in 4QFY2024 compared to 3QFY2024, driven by an increase in advertising spending during the year-end festive period.
Additionally, it is cautiously optimistic about the sustainability of Star Media’s property development segment, supported by further sales recognition from the Star Business Hub project, and improved occupancy rates in its investment properties.
“We also view potential mergers and acquisitions as a viable avenue for Star (Media) to broaden its revenue base.”